What music is the Soybean market dancing to?

Soybean traders continue to debate the weather in South America, the direction of the U.S. dollar, and overall Chinese demand.

The bears arguably point to an improved South American weather forecast while the Chinese remain on an extended vacation with little in the way of fresh demand headlines.

I should note that the ship lineup to load soybeans is building rapidly in the ports of Brazil and appear to be much larger than at this time last year. Meaning Chinese demand could quickly start shifting. Meal's also been back in the headlines, as I've seen a bit more debate and talk circulating in regard to what implications substitutes like DDGs, lysine and tryptophan will bring to overall global meal demand?

It's certainly an interesting debate and involves a lot of forward thinking, but I'm just not sure the trade is ready to listen to that type of "music." Great to hear but clearly different dance steps. Perhaps more pressing and of more nearby interest to the larger macro players is the overall "commodity space" and how Trump policy will impact commodities as an entire asset class. Look for today's Federal Reserve policy announcement to add another important piece to that puzzle.

The U.S. dollar had been strengthening, based on the idea that Trump's tax and spending policies would eventually reflate the economy and result in higher interest rates. However as of late the dollar has been under pressure as "protectionism" sparks more wide-spread concerns. Regardless of the direction of the dollar, I feel like its somewhat decoupled from commodities and many of the larger funds will continue to look for exposure in the space.

I'm hoping that type of mentality leads to buying on the bigger breaks and limits our overall downside exposure. Keep in mind a massive wave of Brazilian currency swaps are being rolled as they are set to expire today, so perhaps nearby this could bring about a headwind or adjustment by a few of the funds who are using soybeans as some type of "cross-hedge" strategy. I continue to look for extreme volatility but want to remain patient in regard to reducing additional new-crop price risk.